2017 (11) TMI 760 - AT - Central Excise

Clearance of iron waste & scrap without payment of duty - whether clearance of Iron waste and scrap after 16.06.2005 alleged to be generated out of capital goods on which CENVAT Credit availed, be subjected to duty on its transaction value or otherwise? - Held that - a plain reading of Rule 3(5A) of CCR, 2004, inserted w.e.f. 16.06.2005 makes it clear that waste and scrap of capital goods on which CENVAT credit has been availed, if cleared from the factory then the manufacturer shall pay an amount equal to the duty leviable on the transaction value of the waste and scrap. The said rule would come into play only when the capital goods credit had been availed by the assessee and later waste and scrap arose out of the said capital goods. In the present case though the appellant has been vehemently arguing that they had received capital goods prior to 1994 and the worn machines/parts were removed as waste and scrap, the said facts had not been verified - matter is remanded to the original adjudicating authority to verify the evidences placed by the appellant before this forum and other evidences - appeal allowed by way of remand.

Summary

Issues:
1. Duty liability on clearance of iron waste and scrap.
2. Application of Rule 3(5A) of CCR, 2004.
3. Verification of CENVAT credit on capital goods.

Analysis:
1. The case involved an appeal against a demand notice for recovery of duty on iron waste and scrap cleared without payment of duty. The appellant argued that the waste and scrap did not arise from capital goods on which CENVAT credit was availed. The Ld. Commissioner (Appeals) upheld the demand, leading to the present appeal.

2. The appellant contended that before applying Rule 3(5A) of CCR, 2004, the department must prove that the waste and scrap cleared arose from capital goods with CENVAT credit. The appellant cited relevant tribunal decisions and submitted a Chartered Accountants Certificate to support their claim of not availing CENVAT credit on the capital goods sold as scrap.

3. The Revenue argued that Rule 3(5A) makes waste and scrap of capital goods liable to duty based on transaction value. They claimed the appellant failed to discharge duty on such waste and scrap, as required by the rule. The Revenue referenced a judgment by the Hon’ble Gujarat High Court to support their stance.

4. The Tribunal analyzed Rule 3(5A) of CCR, 2004, which mandates duty payment on waste and scrap of capital goods with availed CENVAT credit. The Tribunal noted that the appellant's claim of no CENVAT credit on capital goods was unsubstantiated. The Tribunal emphasized the need to verify if CENVAT credit was availed on the capital goods that later became waste and scrap.

5. Consequently, the impugned order was set aside, and the matter was remanded to the adjudicating authority for further verification of the appellant's evidence regarding CENVAT credit on the capital goods. The appeal was allowed for a de novo proceeding to ascertain the facts before imposing duty liability on the waste and scrap in question.